Executive Briefings

Supply-chain Management Plays Strategic Role at Grocery Retailer

A conversation with Bill Parry, vice president of logistics for Pittsburgh-based supermarket retailer Giant Eagle.

Giant Eagle, one of the nation's largest privately owned and family operated companies, has annual sales of $5.2bn. Its 221 supermarket locations throughout Pennsylvania, Ohio, West Virginia and Maryland, serve more than five million customers annually. Bill Parry held numerous positions for Giant Eagle, including distribution center supervisor and manager of the company's transportation group, before he was asked to create and head a corporate logistics department in 1995.

Q: What was going on at Giant Eagle 10 years ago when you were asked to create a logistics department?
Parry: Around that time, we were dealing with some logistics-focused operating issues, including labor and hours-of-service issues. However, we made it through all of those issues and found ourselves at a position where we had the capital for new equipment, so things were looking pretty good. Then my boss, Larry Baldauf, who at that time was vice president of distribution for Giant Eagle and is now senior vice president, wanted me to come work for him at the corporate headquarters. He told me that he wanted me to start a logistics department. I said, "OK, but what do you want me to do?" "I don't know," he said, "but we'll figure it out together."

I really give Larry credit for recognizing back in 1995 that the industry was changing and that we were in need of changing our logistics philosophy in order to sustain our competitive position. So we started basically from scratch. All we had at the time was a traffic department.

Today we have a dedicated department that is focused on supply chain excellence. We are responsible for all product movement inbound to five distribution centers and outbound from the distribution centers to our 221 retail locations, as well as to a number of wholesale customers. We have a director of inbound logistics, who has a logistics manager and several logistics analysts working for him. We assign a logistics analyst to work with each of our different product category teams. On the outbound side, we have transportation people in every distribution center and a central transportation management group that takes care of all the routing, systems and customer service.

Q: Give us an idea of the volume you handle.
Parry: Outbound, we will ship more than 210 million cases of goods, or 125,000 truckloads, this year from all of our DCs, which together represents about 2.4 million square feet of space. Inbound, we will receive approximately 111,000 orders. Our private fleet will travel about 16.5 million miles this year, primarily from DC to store, plus some backhaul freight.

Q: What systems do you use to manage your transportation?
Parry: When we started back in 1995 one of the first things we wanted to do was to bring a little sophistication to our inbound side in the form of a transportation management system. We had a procurement system, but there is only so much information contained in a purchase order and we just didn't have all the information we needed to effectively manage our inbound. We started with a system from Manugistics, which was a very good system for us and worked well for a number of years. However, we realized a definite need to move our decision-making further up the chain. We needed to be able to put real-time information in front of our employees as they were performing various activities to make their decisions more effective. We believed that, if given the opportunity and the right information, our people could make decisions upstream that would save us touches downstream, or enable us to substitute information for activity.

It was at this time that we got involved with the folks at G-Log to utilize their system and achieve our goals. Their GC3 (Global Command and Control Center) is a web-based application that lets us share information with all of our partners, both internal and external. As long as they had a web browser, we could deal with our carriers, our vendors, our procurement folks, our logistics folks, our distribution folks, whoever. We went live with G-Log in February 2003 and for the first time we had one system that gave us visibility to all of our inbound, whether it was coming in on our truck or as a vendor-delivered load. This was extremely helpful in our ability to realize and manage trends.

For example, early last year we recognized that we had some issues with some of our vendor-delivered freight. Even though we are not managing that freight, we were able to work on this with our vendors and our procurement folks. As a result, we had a really smooth fourth quarter, which is always the busiest for the grocery industry. We were very successful in terms of managing both capacity and performance because we had the information up front and were able to sit down with the vendors ahead of time. And our vendors want the same things we do. They don't want to have problems getting their goods to us, so it really worked out well.

On the outbound side, we decided to go with a central transportation management style, which also meant a centralized customer service group. All the orders are sent to one place, and we use G-Log to do our routing and optimization. That information is then fed to the distribution centers for actual dispatch. Before, we had only a routing system and zero system support for managing our private fleet, which is fairly sizeable-240 power units and about 800 trailers.

At the same time that we went with G-Log, we had been able to secure the capital investment to install a Qualcomm satellite tracking system and put onboard computers in each truck. We also put in an AgentTech system that allows us to capture electronic signatures when a delivery is completed at our stores. We began to use a fuel reporting system from Scully and we tied it all together with a dispatch solution from TMW Systems. This enabled us to put driver labor standards in and to really begin to measure and run our fleet more efficiently.

I will tell you that this was not an easy process because, instead of taking the time to be proficient at one system and then implementing another one, we did a big-bang installation. We threw everything in at once. We knew it was going to be an involved process, but we figured that, in the end, this approach would really reduce our learning curve and save valuable time. And it did. Our folks really did a wonderful job.

Q: Can you give me a walk through of how it works?
Parry: I'll start on the inbound side. First, a purchase order is created in our procurement system, which is from BICEPS. These POs are fed into our inbound transportation management system, which is G-Log, about every 15 minutes. G-Log optimizes the information and flags which loads are to be sent to our private fleet, which are to be vendor delivered, and which loads we will manage through our third-party carriers. The private-fleet loads are sent over to those folks and G-Log electronically tenders an offer to the carriers for the loads they will handle. The carriers actually get an e-mail notification and then they log onto the web site to review the information. They are given a certain amount of time to either accept or reject the load. All the pertinent information is right there for them on the web-pickup times at the vendor, delivery times and so on. Upon acceptance, the information is sent to the vendor to let them know which carrier will be picking up and it is sent to our DC to let them know what is coming to them.

There are automatic event updates that take place along the way. Perishable goods have more events tracked than non-perishables, but this can be anything from whether the pickup appointment was met to when the truck left the dock. We don't control all of our freight-we don't want to control all of our freight. But we do need visibility to all of our freight.

When vendors choose the carrier, they feed that information to us so we get it into our system. Then, they can go in and see when their carrier left our building. Once the product is received into our WMS system at the distribution center, notification is sent to our accounts payable folks. The financial system matches the PO to the receipt and payment is sent out automatically.

On the outbound side, our stores transmit orders throughout the day to corporate. After these are processed they are routed out to our distribution centers for fulfillment. These orders determine the picking sequence in the warehouse.

I should tell you that we currently are in the process of switching to a new warehouse management system from Manhattan Associates. We don't have Manhattan in every facility yet, but we will roll it out over the next couple of years. So what I am describing is not yet 100 percent across our system.

Every line item is scanned as it is loaded onto a truck and once the load is complete, an electronic invoice listing everything on that truck is sent to the store. The stores receive their invoices, including shorts, several hours before the truck arrives-usually six to eight hours before depending on the store location-so the store is able to see and understand what product or products they have coming to them from the distribution center. Once a driver checks in and is assigned a truck, his particular route information is sent by radio frequency to the Qualcomm onboard computer. We then track the truck along its route. We have labor standards associated with each of our routes.

When a driver arrives at the store, this event is time-stamped in the computer. While unloading, the driver scans the pallets again to verify that the right pallets are being off-loaded at the store, and the receiver is asked to rate the load to confirm if it was in good shape when it got there. The driver uses his handheld to capture any comment from the receiver, along with an electronic signature. The only paperwork that the driver will have at this point, unless scheduled to make a backhaul, is a vehicle inspection report that is required by DOT, and we are working on getting that done electronically. We are really trying to capture as much as we can in digital form so that it is easier to store and retrieve.

Q: Has having end-to-end visibility enabled you to reduce inventory and lead times?
Parry: Yes. The Giant Eagle supply chain excellence team is committed to implementing lean thinking principles. We want to eliminate touches, eliminate situations where vendors produce more goods than they need to, and that is done by getting information further up the chain. Before, our lead times typically were seven to 10 days, which is a time span that started when we were sending purchase orders through the mail. Even after we went to EDI notification, the lead times didn't change that much because we still had the same existing systems. Now, because of G-Log and these other tools, we can share information with the vendor. We take information from our stores or warehouses and feed it back to the vendor within 24 hours or 48 hours. Then we can start tracking events and really work on reducing those lead times. We now have some of our larger vendors working on a 24-hour lead time, though most are at three to four days, which is a lot better than the seven to 10 days we were experiencing before.

Q: In the grocery business you have a lot of products with expiration dates. Does that make the lead-time issue particularly important?
Parry: The biggest opportunity here is not with the dated products because vendors that have expiration dates on their products and buyers buying those products are already in tune to that limited shelf life. The issues are with paper goods and dry goods and canned goods that can be out there for an extended period of time.

Q: Are you preparing for RFID?
Parry: Absolutely. We have a small team that is dedicated to keeping abreast of the status of RFID and we will acquire RFID capability with the Manhattan installation. In the meantime, as RFID works its way through, we will use Manhattan to do some more traditional things with barcodes, such as advance ship notices.

Q: Has Giant Eagle been much affected by the changes in the hours-of-service for drivers?
Parry: Hours-of-service rules should not hurt an efficient supply chain. The only people that are impacted are those folks that have an inefficient network. In fact, because drivers can drive an additional hour, if you are very good on the front end and the back end, you are going to end up ahead. That's what we have seen. We have put in unloading services in all of our facilities, and we have expanded our drop-lot program for both our carriers and vendor carriers.

From an outbound side, from DCs to the stores, we have not been impacted from the hours of service. On the inbound side, we contacted all of our vendors early on and invited them to come in and sit with us so we could share our views. We had some vendors that had issues, so we brought them in and worked together to make some changes. They were happy and we were happy. But we did not accept any rate increases from our vendors based on the hours-of-service changes, because we felt it was not necessary.

Q: What were some of the things you changed for the vendors that were having problems?
Parry: In some cases, we put a drop trailer at their site, where previously we didn't have that. Or maybe it turned out that they just had the wrong carrier and we helped them find a different carrier to support that lane who could do a little better job for them. Frankly, most of the vendors did a very nice job of adjusting.

Q: Are you getting the capacity you need?
Parry: Yes. It has been a significant investment; however, we were able to secure the capacity necessary to keep the goods flowing without interruption.

Q: What is on the horizon?
Parry: The biggest thing on the horizon is that Giant Eagle has created a department called Giant Eagle Business Systems, which is focused on implementing lean thinking principles in all areas of our daily operations including supply chain functions-eliminating touches, unbundling costs, and collapsing processes. And the supply chain excellence concept that we have embraced plays right into that. We want our partners to understand what it means to do business with Giant Eagle. We want to put our precepts out there as to what we believe, particularly when it comes to relying on data and fact-based management as opposed to opinions. So it's an exciting time here at Giant Eagle. We continue to move our supply chain operations from a good way to do business to a strategic part of how we manage our business.

Q: Do you have any "lessons learned" that you would like to share with our readers?
Parry: The biggest lesson I have learned is that you really need to just get into the game, as you will learn more by doing than by waiting for the perfect solution or the perfect decision. Just get in there and start making some changes. Are you going to be as good Day 1 as Day 10? No. And you are not going to be as good Day 10 as Day 100, but you will keep getting there.

Giant Eagle, one of the nation's largest privately owned and family operated companies, has annual sales of $5.2bn. Its 221 supermarket locations throughout Pennsylvania, Ohio, West Virginia and Maryland, serve more than five million customers annually. Bill Parry held numerous positions for Giant Eagle, including distribution center supervisor and manager of the company's transportation group, before he was asked to create and head a corporate logistics department in 1995.

Q: What was going on at Giant Eagle 10 years ago when you were asked to create a logistics department?
Parry: Around that time, we were dealing with some logistics-focused operating issues, including labor and hours-of-service issues. However, we made it through all of those issues and found ourselves at a position where we had the capital for new equipment, so things were looking pretty good. Then my boss, Larry Baldauf, who at that time was vice president of distribution for Giant Eagle and is now senior vice president, wanted me to come work for him at the corporate headquarters. He told me that he wanted me to start a logistics department. I said, "OK, but what do you want me to do?" "I don't know," he said, "but we'll figure it out together."

I really give Larry credit for recognizing back in 1995 that the industry was changing and that we were in need of changing our logistics philosophy in order to sustain our competitive position. So we started basically from scratch. All we had at the time was a traffic department.

Today we have a dedicated department that is focused on supply chain excellence. We are responsible for all product movement inbound to five distribution centers and outbound from the distribution centers to our 221 retail locations, as well as to a number of wholesale customers. We have a director of inbound logistics, who has a logistics manager and several logistics analysts working for him. We assign a logistics analyst to work with each of our different product category teams. On the outbound side, we have transportation people in every distribution center and a central transportation management group that takes care of all the routing, systems and customer service.

Q: Give us an idea of the volume you handle.
Parry: Outbound, we will ship more than 210 million cases of goods, or 125,000 truckloads, this year from all of our DCs, which together represents about 2.4 million square feet of space. Inbound, we will receive approximately 111,000 orders. Our private fleet will travel about 16.5 million miles this year, primarily from DC to store, plus some backhaul freight.

Q: What systems do you use to manage your transportation?
Parry: When we started back in 1995 one of the first things we wanted to do was to bring a little sophistication to our inbound side in the form of a transportation management system. We had a procurement system, but there is only so much information contained in a purchase order and we just didn't have all the information we needed to effectively manage our inbound. We started with a system from Manugistics, which was a very good system for us and worked well for a number of years. However, we realized a definite need to move our decision-making further up the chain. We needed to be able to put real-time information in front of our employees as they were performing various activities to make their decisions more effective. We believed that, if given the opportunity and the right information, our people could make decisions upstream that would save us touches downstream, or enable us to substitute information for activity.

It was at this time that we got involved with the folks at G-Log to utilize their system and achieve our goals. Their GC3 (Global Command and Control Center) is a web-based application that lets us share information with all of our partners, both internal and external. As long as they had a web browser, we could deal with our carriers, our vendors, our procurement folks, our logistics folks, our distribution folks, whoever. We went live with G-Log in February 2003 and for the first time we had one system that gave us visibility to all of our inbound, whether it was coming in on our truck or as a vendor-delivered load. This was extremely helpful in our ability to realize and manage trends.

For example, early last year we recognized that we had some issues with some of our vendor-delivered freight. Even though we are not managing that freight, we were able to work on this with our vendors and our procurement folks. As a result, we had a really smooth fourth quarter, which is always the busiest for the grocery industry. We were very successful in terms of managing both capacity and performance because we had the information up front and were able to sit down with the vendors ahead of time. And our vendors want the same things we do. They don't want to have problems getting their goods to us, so it really worked out well.

On the outbound side, we decided to go with a central transportation management style, which also meant a centralized customer service group. All the orders are sent to one place, and we use G-Log to do our routing and optimization. That information is then fed to the distribution centers for actual dispatch. Before, we had only a routing system and zero system support for managing our private fleet, which is fairly sizeable-240 power units and about 800 trailers.

At the same time that we went with G-Log, we had been able to secure the capital investment to install a Qualcomm satellite tracking system and put onboard computers in each truck. We also put in an AgentTech system that allows us to capture electronic signatures when a delivery is completed at our stores. We began to use a fuel reporting system from Scully and we tied it all together with a dispatch solution from TMW Systems. This enabled us to put driver labor standards in and to really begin to measure and run our fleet more efficiently.

I will tell you that this was not an easy process because, instead of taking the time to be proficient at one system and then implementing another one, we did a big-bang installation. We threw everything in at once. We knew it was going to be an involved process, but we figured that, in the end, this approach would really reduce our learning curve and save valuable time. And it did. Our folks really did a wonderful job.

Q: Can you give me a walk through of how it works?
Parry: I'll start on the inbound side. First, a purchase order is created in our procurement system, which is from BICEPS. These POs are fed into our inbound transportation management system, which is G-Log, about every 15 minutes. G-Log optimizes the information and flags which loads are to be sent to our private fleet, which are to be vendor delivered, and which loads we will manage through our third-party carriers. The private-fleet loads are sent over to those folks and G-Log electronically tenders an offer to the carriers for the loads they will handle. The carriers actually get an e-mail notification and then they log onto the web site to review the information. They are given a certain amount of time to either accept or reject the load. All the pertinent information is right there for them on the web-pickup times at the vendor, delivery times and so on. Upon acceptance, the information is sent to the vendor to let them know which carrier will be picking up and it is sent to our DC to let them know what is coming to them.

There are automatic event updates that take place along the way. Perishable goods have more events tracked than non-perishables, but this can be anything from whether the pickup appointment was met to when the truck left the dock. We don't control all of our freight-we don't want to control all of our freight. But we do need visibility to all of our freight.

When vendors choose the carrier, they feed that information to us so we get it into our system. Then, they can go in and see when their carrier left our building. Once the product is received into our WMS system at the distribution center, notification is sent to our accounts payable folks. The financial system matches the PO to the receipt and payment is sent out automatically.

On the outbound side, our stores transmit orders throughout the day to corporate. After these are processed they are routed out to our distribution centers for fulfillment. These orders determine the picking sequence in the warehouse.

I should tell you that we currently are in the process of switching to a new warehouse management system from Manhattan Associates. We don't have Manhattan in every facility yet, but we will roll it out over the next couple of years. So what I am describing is not yet 100 percent across our system.

Every line item is scanned as it is loaded onto a truck and once the load is complete, an electronic invoice listing everything on that truck is sent to the store. The stores receive their invoices, including shorts, several hours before the truck arrives-usually six to eight hours before depending on the store location-so the store is able to see and understand what product or products they have coming to them from the distribution center. Once a driver checks in and is assigned a truck, his particular route information is sent by radio frequency to the Qualcomm onboard computer. We then track the truck along its route. We have labor standards associated with each of our routes.

When a driver arrives at the store, this event is time-stamped in the computer. While unloading, the driver scans the pallets again to verify that the right pallets are being off-loaded at the store, and the receiver is asked to rate the load to confirm if it was in good shape when it got there. The driver uses his handheld to capture any comment from the receiver, along with an electronic signature. The only paperwork that the driver will have at this point, unless scheduled to make a backhaul, is a vehicle inspection report that is required by DOT, and we are working on getting that done electronically. We are really trying to capture as much as we can in digital form so that it is easier to store and retrieve.

Q: Has having end-to-end visibility enabled you to reduce inventory and lead times?
Parry: Yes. The Giant Eagle supply chain excellence team is committed to implementing lean thinking principles. We want to eliminate touches, eliminate situations where vendors produce more goods than they need to, and that is done by getting information further up the chain. Before, our lead times typically were seven to 10 days, which is a time span that started when we were sending purchase orders through the mail. Even after we went to EDI notification, the lead times didn't change that much because we still had the same existing systems. Now, because of G-Log and these other tools, we can share information with the vendor. We take information from our stores or warehouses and feed it back to the vendor within 24 hours or 48 hours. Then we can start tracking events and really work on reducing those lead times. We now have some of our larger vendors working on a 24-hour lead time, though most are at three to four days, which is a lot better than the seven to 10 days we were experiencing before.

Q: In the grocery business you have a lot of products with expiration dates. Does that make the lead-time issue particularly important?
Parry: The biggest opportunity here is not with the dated products because vendors that have expiration dates on their products and buyers buying those products are already in tune to that limited shelf life. The issues are with paper goods and dry goods and canned goods that can be out there for an extended period of time.

Q: Are you preparing for RFID?
Parry: Absolutely. We have a small team that is dedicated to keeping abreast of the status of RFID and we will acquire RFID capability with the Manhattan installation. In the meantime, as RFID works its way through, we will use Manhattan to do some more traditional things with barcodes, such as advance ship notices.

Q: Has Giant Eagle been much affected by the changes in the hours-of-service for drivers?
Parry: Hours-of-service rules should not hurt an efficient supply chain. The only people that are impacted are those folks that have an inefficient network. In fact, because drivers can drive an additional hour, if you are very good on the front end and the back end, you are going to end up ahead. That's what we have seen. We have put in unloading services in all of our facilities, and we have expanded our drop-lot program for both our carriers and vendor carriers.

From an outbound side, from DCs to the stores, we have not been impacted from the hours of service. On the inbound side, we contacted all of our vendors early on and invited them to come in and sit with us so we could share our views. We had some vendors that had issues, so we brought them in and worked together to make some changes. They were happy and we were happy. But we did not accept any rate increases from our vendors based on the hours-of-service changes, because we felt it was not necessary.

Q: What were some of the things you changed for the vendors that were having problems?
Parry: In some cases, we put a drop trailer at their site, where previously we didn't have that. Or maybe it turned out that they just had the wrong carrier and we helped them find a different carrier to support that lane who could do a little better job for them. Frankly, most of the vendors did a very nice job of adjusting.

Q: Are you getting the capacity you need?
Parry: Yes. It has been a significant investment; however, we were able to secure the capacity necessary to keep the goods flowing without interruption.

Q: What is on the horizon?
Parry: The biggest thing on the horizon is that Giant Eagle has created a department called Giant Eagle Business Systems, which is focused on implementing lean thinking principles in all areas of our daily operations including supply chain functions-eliminating touches, unbundling costs, and collapsing processes. And the supply chain excellence concept that we have embraced plays right into that. We want our partners to understand what it means to do business with Giant Eagle. We want to put our precepts out there as to what we believe, particularly when it comes to relying on data and fact-based management as opposed to opinions. So it's an exciting time here at Giant Eagle. We continue to move our supply chain operations from a good way to do business to a strategic part of how we manage our business.

Q: Do you have any "lessons learned" that you would like to share with our readers?
Parry: The biggest lesson I have learned is that you really need to just get into the game, as you will learn more by doing than by waiting for the perfect solution or the perfect decision. Just get in there and start making some changes. Are you going to be as good Day 1 as Day 10? No. And you are not going to be as good Day 10 as Day 100, but you will keep getting there.